Frederick County Bancorp, Inc. (the “Company”) (OTC Pink Marketplace: FCBI), the parent company for Frederick County Bank (“FCB”), announced today that, for the quarter ended December 31, 2017, the Company recorded net income of $341 thousand and diluted earnings per share of $0.22, as compared to net income of $149 thousand and diluted earnings per share of $0.10 recorded for the fourth quarter of 2016. The Company earned $2.1 million with diluted earnings per share of $1.32 for the year ended on December 31, 2017, as compared to $1.3 million in earnings and diluted earnings per share of $0.82 for the same period in 2016.

The increase in quarterly earnings was due primarily to increases in net interest income of $201 thousand and in total noninterest income of $57 thousand and a decrease in total noninterest expense of $108 thousand in the fourth quarter of 2017 as compared to the third quarter of 2016, respectively. A provision for loan losses in the amount of $281 thousand was recorded in the fourth quarter of 2017, while a provision for loan losses of $600 thousand was recognized in the same quarter of 2016. The provision for income taxes increased by $493 thousand in the fourth quarter of 2017 as compared to the same period of 2016 due to a higher level of pre-tax income and the recognition of a decrease in the deferred tax assets of $231 thousand in 2017 due to the reduction in the federal corporate income tax rate from 35% to 21% enacted in December 2017 and effective January 1, 2018. The Company’s effective tax rate was 34% at the time of enactment.

The increase in full-year earnings was due primarily to increases in net interest income of $908 thousand and in total noninterest income of $610 thousand in the full year of 2017 as compared to the same period in 2016, respectively. The increase in total noninterest income was due primarily to increases in securities gains of $365 thousand, gain on sale of loans of $187 thousand, and in other operating income of $118 thousand in the full year of 2017 as compared to the same period in 2016. The provision for income taxes increased by $914 thousand in the full year of 2017 as compared to the same period of 2016 due to a higher level of pre-tax income and the recognition of a decrease in the deferred tax assets of $231 thousand in 2017 due to the reduction in the federal corporate income tax rate.

Earnings in 2017 benefitted from the continued emphasis on Small Business Administration (SBA) loans as reflected in the year on year increases in gain on sale of loans. For two years in a row FCB has been recognized as a top 10 SBA lender in the greater Baltimore area.

The ratio of the allowance for loan losses to total loans stood at 1.01% and 1.22% as of December 31, 2017 and 2016, respectively. The improvement in loan asset quality was the driver behind the reduction in the ratio of the allowance to total loans at December 31, 2017. Total nonperforming assets stood at $5.4 million and $7.4 million at December 31, 2017 and 2016, respectively. The corresponding nonperforming assets to total assets ratios were 1.32% and 1.96% as of December 31, 2017 and 2016, respectively.

The Company also reported that, as of December 31, 2017, assets stood at $405.8 million, with total deposits of $332.0 million and gross loans of $322.2 million, representing increases of 7.1%, 3.1%, and 5.2%, respectively, compared to December 31, 2016. Total shareholders’ equity at December 31, 2017 was $32.6 million, an increase of $1.5 million from December 31, 2016. The increase primarily resulted from an increase in retained earnings of $1.6 million. On a per share basis, book value increased by $0.96 for 2017 to $21.85 per share at December 31, 2017 from $20.89 per share at December 31, 2016. The dividends declared per share were $0.30 for the twelve month period ended December 31, 2017 as compared to $0.28 per share for the same period in 2016. On December 18, 2017 and October 2, 2017, the Board declared quarterly dividends of $0.08 per share, an increase of $0.01 per share relative to prior quarters.

Frederick County Bank is headquartered in Frederick, Maryland, and conducts full service commercial banking services through five bank centers located in Frederick County, Maryland.

               

December 31,

December 31,
2017     2016
(dollars in thousands) (unaudited) (audited)
Total assets $405,796 $378,753
Loans 322,156 306,599
Deposits 332,005 321,952
Shareholders’ equity 32,621 31,161
 
Nonperforming assets:
Nonaccrual loans $3,756 $6,172
Accruing troubled debt restructurings 345 405
Loans 90 days or more past due and still accruing

-

-
Foreclosed properties 1,264     866
Total nonperforming assets $5,365     $7,443
 
 
For the Three Months Ended For the Years Ended
December 31, December 31, December 31, December 31,
2017     2016 2017     2016
(dollars in thousands, except for per share data) (unaudited) (audited) (unaudited) (audited)
SUMMARY OF OPERATING RESULTS:
Net income $341     $149 $2,050     $1,257
Total comprehensive income $107     $277 $1,914     $1,802
 
Charge-offs $1,091 $- $1,369 $236
(Recoveries) (8)     (22) (245)     (66)
Net charge-offs (recoveries) $1,083     $(22) $1,124     $170
 
PER COMMON SHARE DATA:
Basic earnings per share $0.23 $0.10 $1.37 $0.85
Diluted earnings per share $0.22 $0.10 $1.32 $0.82
Basic weighted average number of shares outstanding 1,493,018 1,490,257 1,492,792 1,486,502
Diluted weighted average number of shares outstanding 1,554,769 1,542,745 1,551,807 1,542,119
Common shares outstanding 1,493,044 1,491,844 1,493,044 1,491,844
Dividends declared (1) $0.16 $0.07 $0.30 $0.28
Book value per share $21.85 $20.89 $21.85 $20.89
 
SELECTED UNAUDITED FINANCIAL RATIOS:
Return on average assets 0.34% 0.16% 0.52% 0.34%
Return on average equity 4.12% 1.90% 6.34% 4.09%
Allowance for loan losses to total loans 1.01% 1.22% 1.01% 1.22%
Nonperforming assets to total assets 1.32% 1.96% 1.32% 1.96%
Ratio of net (recoveries) charge-offs to average loans 0.34% (0.01)% 0.36% 0.06%
Common Equity Tier 1 to risk-weighted assets 8.72% 8.65% 8.72% 8.65%
Tier 1 capital to risk-weighted assets 10.35% 10.35% 10.35% 10.35%
Total capital to risk-weighted assets 11.23% 11.40% 11.23% 11.40%
Tier 1 capital to average assets 9.65% 9.66% 9.65% 9.66%
Average equity to average assets 8.34% 8.28% 8.16% 8.39%
Net interest margin 3.58% 3.50% 3.59% 3.62%

(1) Includes dividends of $0.08 per share declared on both October 2, 2017 and December 18, 2017.

 
       
Frederick County Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, December 31,
      2017     2016
      (unaudited)     (audited)
(dollars in thousands)            
ASSETS
Cash and due from banks $ 2,726 $ 2,811
Federal funds sold 5 1,059
Interest-bearing deposits in other banks     34,628     25,804
Cash and cash equivalents     37,359     29,674
Investment securities available-for-sale at fair value 24,745 24,644
Restricted stock 2,367 1,687
Loans held for sale - 357
Loans 322,156 306,242
Less: Allowance for loan losses     (3,265)     (3,744)
Net loans     318,891     302,498
Bank premises and equipment 9,542 7,490
Bank owned life insurance 8,946 8,735
Foreclosed properties 1,264 866
Other assets     2,682     2,802
Total assets     $405,796     $378,753
 
LIABILITIES AND SHAREHOLDERS' EQUITY            
             
Liabilities
Deposits
Noninterest-bearing deposits $ 89,616 $ 83,249
Interest-bearing deposits     242,389     238,703
Total deposits 332,005 321,952
Short-term borrowings 4,200 3,300
FHLB advances 29,700 15,000
Junior subordinated debentures 6,186 6,186
Accrued interest and other liabilities     1,084     1,154
Total liabilities     373,175     347,592
 
Shareholders' Equity

Common stock, per share par value $0.01; 10,000,000 shares authorized; 1,493,004 and 1,489,844 shares issued and outstanding, respectively

15

15

Additional paid-in capital 15,397 15,404
Retained earnings 16,829 15,289
Accumulated other comprehensive income     380     453
Total shareholders' equity     32,621     31,161
Total liabilities and shareholders' equity     $405,796     $378,753
 
               
Frederick County Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
     

For the Three Months Ended

    

For the Years Ended

(dollars in thousands, except per share amounts)     December 31,

2017

     December 31,

2016

     December 31,

2017

     December 31,

2016

Interest income
Interest and fees on loans $3,563 $3,342 $14,075 $13,198
Interest and dividends on investment securities:
Interest – taxable 113 60 408 250
Interest – tax exempt 26 29 105 147
Dividends 42 23 118 97
Interest on federal funds sold - 2 1 6
Other interest income     99     47     402     155
Total interest income     3,843     3,503     15,109     13,853
Interest expense
Interest on deposits 332 263 1,250 1,072
Interest on short-term borrowings 43 28 164 113
Interest on FHLB advances 74 26 198 110
Interest on junior subordinated debentures     47     40     177     146
Total interest expense     496     357     1,789     1,441
Net interest income 3,347 3,146 13,320 12,412
Provision for loan losses     281     600     645     850
Net interest income after provision for loan losses     3,066     2,546     12,675     11,562
Noninterest income
Securities gains 251 - 416 51
Gain on sale of loans 41 164 439 252
Loss on foreclosed properties - 34 (34) 34
Bank owned life insurance income 52 55 211 223
Service fees 101 90 380 360
Other operating income     32     77     456     338
Total noninterest income     477     420     1,868     1,258
Noninterest expense
Salaries and employee benefits 1,538 1,569 6,572 6,453
Occupancy and equipment expenses 351 461 1,719 1,880
Other operating expenses     785     752     2,760     2,702
Total noninterest expense     2,674     2,782     11,051     11,035
Income before provision for income taxes 869 184 3,492 1,785
Provision for income taxes     528     35     1,442     528
Net income     $ 341     $ 149     $ 2,050     $ 1,257
Basic earnings per share     $0.23     $0.10     $1.37     $0.85
Diluted earnings per share     $0.22     $0.10     $1.32     $0.82
Basic weighted average number of shares outstanding     1,493,018     1,490,257     1,492,792     1,486,502
Diluted weighted average number of shares outstanding     1,554,769     1,542,745     1,551,807     1,542,119
Dividends declared per share (1)     $0.16     $0.07     $0.30     $0.28

(1) Includes dividends of $0.08 per share declared on both October 2, 2017 and December 18, 2017.

 
       
Frederick County Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
      For the Three Months Ended
(dollars in thousands)     December 31,

2017

     December 31,

2016

Net income $341 $149
Changes in net unrealized (losses) gains on securities available for sale, net of income tax benefits of $53 in 2017 and income taxes of $83 in 2016 (82) 128
Reclassification adjustment for (gains) realized, net of income taxes of $99 in 2017 and $0 in 2016     (152)     -
Total other comprehensive income     (234)     128
Total comprehensive income     $107     $277
 
 
      For the Years Ended
(dollars in thousands)     December 31,

2017

     December 31,

2016

Net income     $2,050     $1,257
Changes in net unrealized gains on securities available for sale, net of income taxes of $76 in 2017 and $375 in 2016 115 576
Reclassification adjustment for (gains) realized, net of income taxes of $164 in 2017 and $20 in 2016     (251)     (31)
Total other comprehensive income     (136)     545
Total comprehensive income     $1,914     $1,802
 
   
Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

 

(dollars in thousands)     Shares

Outstanding

     Common

Stock

    

Additional

Paid-in

Capital

    

Retained

Earnings

     Accumulated

Other

Comprehensive

Income

(Loss)

     Total

Shareholders'

Equity

                   
Balance, January 1, 2016 1,475,929 $15 $15,184 $14,449 $ (92) $29,556
Comprehensive income 1,257 545 1,802
Dividends declared on common stock, $0.28 per share (417) (417)
Shares issued under stock option transactions 15,915 180 180
Compensation expense from stock option transactions 12 12
Excess tax benefit for equity-based awards                 28                 28
Balance, December 31, 2016     1,491,844     15     15,404     15,289     453     31,161
Comprehensive income 2,050 (136) 1,914
Reclassification of remaining tax effects on deferred tax assets on securities available for sale (63) 63 -
Dividends declared on common stock, $0.30 per share (447) (447)
Shares issued under stock option transactions 1,200 13 13
Compensation expense from stock option transactions                 (20)                 (20)
Balance, December 31, 2017     1,493,004     $15     $15,397     $16,829     $380     $32,621
 
       
Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

      For The Years Ended
      December 31,     December 31,
(dollars in thousands)     2017     2016
Cash flows from operating activities:
Net income $ 2,050 $ 1,257

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 497 448
Deferred income taxes 294 54
Provision for loan losses 645 850
Securities gains (416) (51)
Gain on sale of loans (439) (252)
Loans originated for sale (7,865) (6,324)
Proceeds from loans sold 8,303 6,219
Net premium amortization on investment securities 133 152
Loss on disposal of bank premises and equipment 2 6
Bank owned life insurance income (211) (223)
Gain (loss) on sale of foreclosed property 34 (34)
Stock-based compensation expense (20) 12
Excess tax benefit from equity-based awards - (28)
Increase in accrued interest and other assets (237) (135)
Increase (decrease) in accrued interest and other liabilities     81     (9)
Net cash provided by operating activities     2,851     1,942
Cash flows from investing activities:
Purchases of investment securities available for sale (4,794) (6,381)
Proceeds from sales of investment securities available for sale 901 1,790

Proceeds from maturities, prepayments and calls investment securities available for sale

3,851 5,109
Purchase of restricted stock (680) (58)
Net increase in loans (17,238) (27,622)
Purchases of bank premises and equipment (2,551) (1,499)
Proceeds from sale of foreclosed property     126     34
Net cash used in investing activities     (20,385)     (28,627)
Cash flows from financing activities:

Net increase in NOW, money market accounts, savings accounts and noninterest-bearing deposits

18,121 19,846
Net (decrease) increase in time deposits (8,068) 6,474
Net increase in short-term borrowings 900 -
Increase in FHLB advances 14,700 -
Proceeds from issuance of common stock 13 180
Dividends paid on common stock (447) (417)
Excess tax benefit from equity-based awards     -     28
Net cash provided by financing activities     25,219     26,111
Net increase (decrease) in cash and cash equivalents 7,685 (574)
Cash and cash equivalents – beginning of period     29,674     30,248
Cash and cash equivalents – end of period     $37,359     $29,674
Supplemental cash flow disclosures:
Interest paid     $1,753     $1,436
Income taxes paid     $1,419     $659
Transfer of loans to foreclosed properties     $558     $160
 

Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential

The following tables show average balances of asset and liability categories, interest income and interest expense, and average yields and rates for the periods indicated.

       
For the Three Months Ended December 31,     2017     2016

 

(dollars in thousands)

     Average

daily

balance

     Interest

Income/

Expense

     Average

Yield/

Rate(%)

     Average

daily

balance

     Interest

Income/

Expense

     Average

Yield/

Rate(%)

Assets                
Interest-earning assets:
Federal funds sold $ 5 $ - - $ 1,059 $ 2 0.75
Interest bearing deposits in other banks 32,916 100 1.21 36,963 47 0.50
Investment securities (1):
Taxable 22,363 155 2.75 17,555 83 1.88
Tax-exempt (2) 3,636 39 4.26 4,086 44 4.27
Loans (3)     315,775     3,585     4.50     301,242     3,362     4.43
Total interest-earning assets     374,695     3,879     4.11     360,905     3,538     3.89
Noninterest-earning assets     21,742 19,154
Total assets     $396,437 $380,059
 
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
NOW accounts $ 40,402 20 0.20 $ 34,796 15 0.17
Savings accounts 13,294 1 0.03 11,502 1 0.03
Money market accounts 98,061 71 0.29 99,993 72 0.29
Certificates of deposit 86,006 240 1.11 92,850 175 0.75
Short-term borrowings 4,200 44 4.16 3,300 29 3.49
FHLB advances 21,004 74 1.40 15,000 26 0.69
Junior subordinated debentures     6,186     47     3.01     6,186     39     2.50
Total interest-bearing liabilities     269,153     497     0.73     263,627     357     0.54
Noninterest-bearing deposits 92,916 83,954
Noninterest-bearing liabilities 1,289 1,027
Total liabilities     363,358 348,608
Total shareholders’ equity     33,079 31,451

Total liabilities and shareholders’ equity

    $396,437 $380,059
Net interest income           $3,382       $3,181
Net interest spread 3.38% 3.35%
Net interest margin 3.58% 3.50%

(1)

   Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which is reflected as a component of shareholders’ equity.

(2)

 Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $13 thousand in 2017 and $15 thousand in 2016 are included in the calculation of the tax-exempt investment interest income.

(3)

 Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $22 thousand in 2017 and $20 thousand in 2016 are included in the calculation of the loan interest income. Net loan origination income (expense) in interest income totaled $5 thousand in 2017 and $(5) thousand in 2016.
 
       
For the Years Ended December 31,     2017     2016

 

(dollars in thousands)

     Average

daily

balance

     Interest

Income/

Expense

     Average

Yield/

Rate(%)

     Average

daily

balance

     Interest

Income/

Expense

     Average

Yield/

Rate(%)

Assets                
Interest-earning assets:
Federal funds sold $ 146 $ 1 0.68 $ 1,064 $ 6 0.56
Interest bearing deposits in other banks 38,281 402 1.05 32,566 155 0.48
Investment securities (1):
Taxable 21,823 526 2.41 18,472 347 1.88
Tax-exempt (2) 3,759 159 4.23 4,937 223 4.52
Loans (3)     311,431     14,175     4.55     290,878     13,303     4.57
Total interest-earning assets     375,440     15,263     4.07     347,917     14,034     4.03
Noninterest-earning assets     20,850 18,727
Total assets     $396,290 $366,644
 
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
NOW accounts $ 38,474 75 0.19 $ 31,705 54 0.17
Savings accounts 12,584 4 0.03 11,130 3 0.03
Money market accounts 101,039 288 0.29 97,368 279 0.29
Certificates of deposit 91,404 883 0.97 93,605 736 0.79
Short-term borrowings 4,192 164 3.91 3,300 113 3.42
FHLB advances 17,554 198 1.13 15,000 110 0.73
Junior subordinated debentures     6,186     177     2.86     6,186     146     2.36
Total interest-bearing liabilities     271,433     1,789     0.66     258,294     1,441     0.56
Noninterest-bearing deposits 91,174 76,711
Noninterest-bearing liabilities 1,329 877
Total liabilities     363,936 335,882
Total shareholders’ equity     32,354 30,762

Total liabilities and shareholders’ equity

    $396,290 $366,644
Net interest income           $13,474       $12,593
Net interest spread 3.41% 3.47%
Net interest margin 3.59% 3.62%

(1)

   Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which is reflected as a component of shareholders’ equity.

(2)

 Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $54 thousand in 2017 and $76 thousand in 2016 are included in the calculation of the tax-exempt investment interest income.

(3)

 Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $100 thousand in 2017 and $105 thousand in 2016 are included in the calculation of the loan interest income. Net loan origination income (expense) in interest income totaled $53 thousand in 2017 and $53 thousand in 2016.
 

The statements in this press release that are not historical facts constitute "forward-looking statements" as defined by Federal securities laws. Forward-looking statements can generally be identified by the use of forward- looking terminology such as "believes," "expects," "intends," "may," "will," "should," "anticipates" or similar terminology. Such statements, specifically regarding the Company's intentions regarding growth and market expansion, are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, changes in interest rates, deposit flows, loan demand and real estate values, as well as changes in economic, competitive, governmental, regulatory, technological and other factors which may affect the Company specifically, its existing and target market areas or the banking industry generally. Forward-looking statements speak only as of the date they are made. The Company will not update forward-looking statements to reflect factual assumptions, circumstances or events that have changed after a forward-looking statement was made.